What alternative would be chosen according to expected value

Reference no: EM13180044

For the payoff table below, the decision maker will use P(s1)=.15, P(s2)=.5, and P(s3)=.35

a. What alternative would be chosen according to expected value?

b. For a lottery having a payoff of 40,000 with probability p and -15,000 with probability (1-p), the decision maker expressed the following indifference probabilities

Payoff Probability
10,000 .85
1000 .60
-2000 .53
-5000 .50

Let U(40,000)=10 and U(-15,000)=0 and find the utility value for each payoff.

c. What alternative would be chosen according to expected utility?

Reference no: EM13180044

Questions Cloud

State atoms the molecular symmetry will decide the polarity : A molecule can be polar or nonpolar depending upon the nature of the bonds and the shape of the molecule. For a molecule that has different outer atoms the molecular symmetry will decide the polarity.

How many students should receive a c : For a class of 43 students, for a certain exam, the mean grade is 67 and the standard deviation is 7, how many students should receive a C?

How is unemployment measured and reported : What is a discouraged worker? Are they included in the basic unemployment rate? Are they included in any measure of unemployment? How has the number of discouraged workers changed since 2008? How does the exclusion of the discouraged worker affect..

Component of the equity section of the balance sheet : What else is a component of the Equity Section of the Balance Sheet? Please explain to the class how the retained earning comes about. You are correct. It is not contributed. How is Treasury Stock shown?

What alternative would be chosen according to expected value : What alternative would be chosen according to expected value?

Determine pw-aw and fw as measures of performance : The Company IIE Inc. is considering upgrading their distribution center (DC) and have received investment proposal from four different vendors. The budget limitation for the investment is $1 million. The investment proposals are listed in Table 1...

What is the approximate pressure : A tank holds liquid waste comprised mostly opf water. It is vented to the atmosphere. the tank has a diameter of 50 feet and a total depth of 30 feet, it is only half full. At a poin t five feet above the bottom of the tank, what is the approximat..

Calculate expected profit and rate of return on investment : Calculate the expected profit and rate of return on investment for each division and for the company as a whole in the coming year, if Division B purchases its motors from Division A, and sells its entire output to retailers.

What are dimensions of box that would maximize volume : What are the dimensions of the box that would maximize the volume.

User Account

All Pages